Microsoft will spin off Bungie the crown jewel of its video game and the unit behind the hit Halo franchise, as a separate company – opening the possibility it could make titles for Microsoft rivals.

Microsoft will retain a stake in the new company, to be called Bungie LLC, and will continue to publish future Halo games and other titles.

Analyst Michael Pachter expects Microsoft would have some exclusive rights to new Bungie games. In the $30 billion video game industry, star developers or teams often jump from one game publisher to work where the grass is greener. Faced with losing key talent, Microsoft made sure the split was amicable, Pachter said.

Bungie said it had no immediate plans to develop for Sony’s PlayStation 3 or Nintendo’s Wii. But as it has been phenomenally successful and boosted Xbox sales, Microsoft will keep the rights to the Halo franchise.

Halo 3 tops $300m

Halo 3 racked up worldwide sales of US$300 million in its first week, making it one of the year’s best sellers. The boom also helped double sales of the Xbox 360 console.

The game is crucial to Microsoft’s efforts to establish dominance in the $30 billion global video game industry that has been dominated by Sony in the past few years and more recently by Nintendo’s Wii console.

– In Australia, Microsoft says Halo 3 has so far sold 70,000 units, making it second bestselling Xbox 360 title, and generated a record A$7.5 million in sales.

Halo 3 accessories (including a “special edition” console) generated more than $2 million.

Xbox 360 hardware sales increased by 55 percent over the week ending September 23, while sales for September were up 158pc over August, making Xbox the top-selling console for September with 31pc market share.

Togther, Xbox 360 hardware, software and accessories brought in more than A$30 million in September, claimed to be half as much again as any other platform.